Strong chip demand has sent semiconductor stocks soaring in the past few quarters amid a global supply shortage, but Truist analyst William Stein has warned that the tide may be turning.
“We found a sudden negative turnaround in demand signals Wednesday afternoon from a wide range of sources, from computer, consumer and communications OEMs to at least half of the semi-finished suppliers of these OEMs,” he said in a research note. ”
Stein noted that the drop in demand was mostly related to second-quarter production, but demand remained strong overall through the second half of the year.
While there could be a one-quarter correction or temporary headwinds, he remains concerned that if the level of demand destruction happens to be combined with the level of additional supply, it could lead to a traditional cyclical recession.
As a result, Stein adjusted his target prices on several key semiconductor stocks, including: AMD (AMD-US), Intel (INTC-US) and Nvidia (NVDA-US)。
target price adjustment
- AMD: Reduced from $144 to $111
- Intel: Revised down from $53 to $49
- Nvidia: Revised down from $347 to $298
He gave AMD and Intel two “hold” ratings, while maintaining Nvidia’s “buy” rating, he said the near-term price impact may be more volatile.
Chip stocks he is bullish on include: NXP Semiconductors (NXPI-US), Analog Devices (ADI-US), and ON Semiconductor (ON-US), as these companies have less exposure to demand from the computer, communications and consumer sectors and instead rely more on industrial and automotive demand.
Semiconductor stocks, which have been rising for the past seven quarters, have since normalized and are down 20 percent from their December peak, Stein said.
AMD shares fell 2.62% on Friday (8th) to close at $101 per share, down nearly 30% so far this year. Intel fell 1.14% to close at $47.02 a share on Friday. Nvidia fell $10.89, or 4.5 percent, to close at $231.19 a share.